Directors, members, and other stakeholders of British Virgin Islands (BVI) corporations should take steps to understand how BVI statute and case law provide for the BVI company restoration (whether they have been struck off or dissolved). On January 1, 2023, changes to the BVI Business Companies Act 2004 (BCA) went into effect, significantly changing the law in this sector.
RESTORING A COMPANY THAT HAS BEEN STRUCK OFF AND DISSOLVED
Before January 1, 2023, a business that had been administratively struck off (often for failing to pay government fees) may be reinstated by a straightforward procedure that involved submitting a form to the Registrar of Companies and paying any outstanding fees and penalties.
According to the previous legislation, a corporation was automatically dissolved, and a distinct restoration procedure was necessary if it was continuously struck off for a period of seven years.
This procedure is changed by the BCA modifications, which became effective on January 1, 2023
Any corporation administratively struck off after January 1, 2023, will only have 90 days to make good on all unpaid fines and penalties and be reinstated. If it doesn’t, the Registrar of Companies may issue a notice that dissolves the company by publishing it in the BVI Gazette.
Companies struck off before January 1, 2023, are subject to transitional provisions. On July 1, 2023, these corporations will be immediately dissolved.
To prevent dissolution, it is crucial to add companies that have been stricken from the register. The process for reviving a corporation that has been liquidated because it was struck off and failed to improve its standing within 90 days is more difficult.
The newly revised BCA allows the Registrar of Companies to reinstate the company to the Register even after it has been struck off and subsequently dissolved. This is a helpful administrative strike-off and dissolution simplification.
The requirements that must be satisfied before the Registrar of Companies would reinstate a struck-off and dissolved company should be made clear to any applicant. The Registrar of Companies must be convinced of the following before approving a restoration application:
- A licensed individual has agreed to serve as the company’s registered agent,
- The registered agent has declared in the approved form that the company’s records have been updated in accordance with the BCA
- the company was carrying on business or in operation at the date of its striking off and dissolution.
- the company has paid the restoration cost and any outstanding fines related to the company
- The Registrar is convinced that restoring the company to the Register would be fair and reasonable.
If any company property has bona vacantia vested in the Crown due to the companies striking off and dissolution, the Financial Secretary must indicate to the Registrar that the Crown agrees with the company’s restoration.
Alternatively, the petitioner must demonstrate that the Financial Secretary ignored its request for the Crown’s approval of the restoration after being told of it for seven days.
A firm that was dissolved after being struck off must submit a request to be restored within five years.
RESTORING A COMPANY AFTER VOLUNTARY/INVOLUNTARY LIQUIDATION
A request must be made to the BVI Court, which makes restoring a corporation that has been liquidated voluntarily or by court order far more complicated. Regarding this matter, the BCA has also been amended.
A person must stand to apply with the BVI Court to restore a dissolved company. The groups of people who may apply have changed. They are as follows:
- a creditor, former director, former member, or former liquidator of the company;
- a person who, but for the company’s dissolution, would have been in a contractual relationship with the company;
- any other competent authority in the BVI;
- a person who may have a legal claim against the firm;
- the manager or trustee of a pension fund set up for the benefit of the company’s employees; or
- anybody else who is interested in seeing the company restored to the Register.
The applicant must seek to reinstate the disbanded business for a legitimate reason.
The BCA lists two legitimate purposes: (i) to begin, continue, or end legal actions in the company’s name or against it; and (ii) to submit a request to recover the company’s property with bona vacantia vested in the Crown.
Outside these two categories, the Court may decide to hear an application to restore a firm if, in light of any unique circumstances, doing so would be fair and equal. This discretion has not yet been put to the test.
After the corporation is dissolved, an application cannot be filed more than five years later. This represents a significant shortening of the time frame that existed before the BCA amendments.
The Financial Services Commission, the Financial Secretary, and the Registrar of Companies (where the Financial Services Act governed the company) must all be notified of the application.
Applications must be accompanied by the Financial Secretary’s certification that the Crown does not object to the restoration, the Financial Secretary’s response stating that the Crown does object, or the applicant’s declaration that they have not heard back from the Financial Secretary within seven days of giving notice of the application.
Only liquidation can bring back a corporation that has been dissolved via voluntary or court-ordered liquidation. Finding a BVI-licensed insolvency practitioner who will agree to serve as the restored business’s liquidator is, therefore, a crucial step to take when submitting an application for the restoration of a corporation.
Upon receiving a valid application, the Court may issue an order restoring the company, provided that it is satisfied that the restored company will be in compliance with all applicable laws, has paid any outstanding fees and penalties, and complies with “such other conditions as the Court considers appropriate.” The majority of the case law in this field has been developed in response to this last condition.
Post application and Order
The restoration of the corporation does not go into effect right away, in contrast to other Court orders. The Registrar of Companies must first be served with a sealed copy of the Court’s Order.
The Registrar of Companies may proceed to restore the Company once this has occurred (and the Registrar is satisfied that the Order’s conditions have been met and all outstanding fees and penalties have been paid).
When the sealed Order was delivered to the Registrar of Companies, that is when restoration became effective. When the applicant is concerned about limitation periods or other deadlines, it is crucial to keep this date in mind. The sealed Order expires after 30 days if it is not served on the Registrar of Companies.
WHY DO INVESTORS CHOOSE TO RESTORE A COMPANY IN BVI?
- Legal Existence – Restoration allows the company to regain its legal existence, which means it can resume conducting business, enter into contracts, and pursue legal actions.
- Asset Preservation – Restoration can help preserve the company’s assets, including any intellectual property, real estate, bank accounts, and investments which may have been frozen or at risk due to the company’s strike-off.
- Business Continuity – Restoration can help maintain business continuity by allowing the company to resume its operations without the need for forming a new company, transferring contracts, or re-establishing business relationships.
- Reputation and Goodwill – Restoration can help protect the company’s reputation and goodwill by allowing it to maintain its established corporate identity and history, which may be valuable in terms of brand recognition and market presence.
CHALLENGES FACE WHEN RESTORING A COMPANY IN BVI
- Costs and Time – BVI company restoration can be a complex and time-consuming process that involves legal and administrative procedures, including filing fees, penalties, and professional fees for legal and accounting services, which can add up to significant costs.
- Compliance Requirements – Restored companies may need to comply with certain regulatory and reporting requirements, such as filing annual returns and financial statements and maintaining a registered office and agent in the British Virgin Islands, which can result in ongoing administrative burdens and costs.
- Legal Limitations – BVI company restoration may not be available in all cases, and there may be legal limitations or restrictions, such as time limits, specific reasons for strike-off, or court approval requirements, which can affect the feasibility of restoration.
- Risk of Liabilities – Restored companies may be subject to liabilities, including any debts, claims, or legal actions that arose during the period of strike-off, which can potentially expose the company and its shareholders to financial and legal risks.
- Public Disclosure – Restoration may result in public disclosure of the company’s financial and legal history, including any past non-compliance or adverse events, which could impact the company’s reputation and goodwill.
What is BVI company restoration?
BVI company restoration is reinstating a company that has been struck off the register of companies in the British Virgin Islands. This allows the company to regain its legal existence and resume its operations.
Why would a BVI company need restoration?
A BVI company may need restoration if it has been struck off the register due to non-compliance with regulatory requirements, failure to file annual returns or financial statements, or other reasons. Restoration may be necessary to revive the company and regain its legal status.
What are the requirements for BVI company restoration?
The requirements for BVI company restoration can vary depending on the specific circumstances and the reason for the strike-off.
Generally, the company may need to settle any outstanding fees, penalties, or liabilities, provide updated information and documents to the relevant authorities, and comply with regulatory and legal requirements.
How long does BVI company restoration take?
The timeline for BVI company restoration can vary depending on various factors, including the case’s complexity, the availability of required documents, and the processing time of the relevant authorities. It can take several weeks to several months to complete the restoration process.
What are the costs associated with BVI company restoration?
The costs of BVI company restoration typically include filing fees, penalties, professional fees for legal and accounting services, and any outstanding liabilities. The total cost can vary depending on the specific requirements and complexities of the case.
Can any BVI company be restored?
Not all BVI companies may be eligible for restoration. There may be limitations or restrictions, such as time limits, specific reasons for strike-off, or court approval requirements. It’s important to consult with professional advisors and review the relevant laws and regulations to determine if a particular BVI company can be restored.
What are the potential benefits of BVI company restoration?
The potential benefits of BVI company restoration may include regaining legal existence, preserving assets, maintaining business continuity, protecting reputation and goodwill, and resolving outstanding issues that led to strike-off.
Are there any risks or disadvantages of BVI company restoration?
Some potential risks or disadvantages of BVI company restoration may include costs and time associated with the process, ongoing compliance requirements, potential liabilities, and public disclosure of past non-compliance or adverse events.
It’s essential to carefully consider the implications and seek professional advice before proceeding with a BVI company restoration.
Can I restore a BVI company on my own?
BVI company restoration can be complex and involve legal and administrative procedures.
It’s advisable to seek professional legal and financial advice to ensure compliance with regulatory requirements and to navigate the restoration process effectively.
Can I appeal a decision to strike off my BVI company?
If your BVI company has been struck off and you believe it was done in error, you can appeal the decision through the appropriate legal channels.
In such cases, consulting with legal advisors and following the prescribed appeal process is recommended.